Fee Clause Interpretation/Section 1717: Third-Party Beneficiaries Win Fee Recovery Under Broadly Worded Prevailing Party Clause

Clause Language and Negotiation of Settlement Demonstrated Prevailing Parties Were Third Party Beneficiaries

     In Homeport Ins. Services, Inc. v. Lundy, Case No. B238296 (2d Dist., Div. 7 Jan. 28, 2013) (unpublished), an injured longshoreman settled a worker’s compensation claim against SSA (terminal associated entities) and a personal injury action against City of Long Beach, agreeing to a “no reemployment” provision in the settlement agreement with City. After longshoreman breached this provision, SSA obtained a summary judgment in an action to enforce the provision and the lower court awarded SSA attorney’s fees under a settlement fee clause to the tune of $129,525.

     Longshoreman, on appeal, challenged the basis for the award, namely, that SSA was an express third-party beneficiary entitled to enforce the fees clause in the settlement agreement with City. Like Loduca v. Polyzos, 153 Cal.App.4th 334 (2007), the clause was broadly worded and not limited to just the parties, which distinguished the different result reached in Real Property Services Corp. v. City of Pasadena, 25 Cal.App.4th 375 (1994). This conclusion was solidified by the fact that SSA owed indemnity rights to City so that it was obvious both the settlement in general and specific fees clause inured to the benefit of SSA as third party beneficiaries. Beyond that, the fee clause was reciprocal in nature such that section 1717’s mutuality rationale applied.

     Fee recovery affirmed.

 

Longshoremen.  James McNeill Whistler, artist.  1859.  Library of Congress.